Commentary

President Bio has outlined very laudable plans in his speech at the state opening of parliament on Thursday May 10th 2018. Significantly, President Bio wants to see a diversification of the economy with special emphasis on agriculture, marine resources and tourism.

The question one development finance economist asked was: Can President Bio be able to significantly diversify the economy without first and foremost diversifying the country’s finance space?
Traditional banking it is largely believed does not favor entrepreneurship, for the following reasons: Traditional commercial banks love to play it safe by borrowing mostly to businesses that can provide collateral security.
Secondly, startup businesses if they can, try as much as possible to avoid taking out commercial loans. This is because of the exorbitant interest rates that commercial banks charge lenders.
It is a given fact that without capital, many new small and medium scale businesses would not see the light of day. Without these businesses, reducing poverty would be an uphill task, as SMEs are the backbone of the private sector. Therefore, expanding the financial space for low interest lending to entrepreneurs should be the foundation of any empowerment of the local entrepreneur class.
All over the world, the private sector is the engine of economic growth and development. The better capitalized they are, the more productive economic activities they can engage in. Therefore, according to UNDP, any significant expansion and broadening of the country’s economic base requires strengthening the performance of SMEs.
In which light, it is very important that in drawing up a new national investment roadmap, the Ministry of Finance, Economic Development, Rural Development and the Ministry of Trade and Industry think seriously about how government can reactivate and capitalize the National Development Bank with branches for a start in all the provincial cities and the National Cooperative Bank with branches in all district headquarter towns.